Following today’s announcement that Innovative Industrial Properties Inc. (IIPR) closed a sale-leaseback agreement with MJardin Group, Inc., IIPR could be the next pot stock to watch.  

Innovative Industrial Properties’ stock has been trending upward, and this latest announcement seems to imply that their momentum could continue.

Why MJardin Group?

MJardin is a marijuana management platform with comprehensive experience in cultivation, processing, distribution and retail. For more than 10 years, MJardin has improved cultivation methodologies, developed cutting edge facilities, and actualized vertical integration on behalf of license owners. MJardin operates out of Denver, Colorado and Toronto, Canada.

Innovative Industrial Properties is a REIT with an emphasis on buying buildings and leasing them to growers of medical cannabis. Their main focus is on acquiring and managing industrial properties that are leased to qualified state-licensed operators for medical-use marijuana facilities. The real estate investment trust also lets U.S.-based cannabis producers with limited financing options borrow money to buy and renovate cultivation and processing facilities.

What the analysts are saying

Zacks Rank, which ranges from #1 (Strong Buy) to #5 (Strong Sell), currently has IIPR listed as a #2 (Buy). The stock has shot up 176.1% year-to-date.

The REIT boosted its earnings by 42.11% and its revenue by 42.65% compared to the last quarter. And shares of IIPR have increased 9.95% during the past month. This has outpaced the Finance sector’s gain of 3.24% and the S&P 500’s gain of 4.46% in that time.

Since the beginning of 2019, Innovative Industrial Properties has more than doubled the size of its leased portfolio to 23 from 11, with an average return on invested capital of 14.7%. At this pace, in less than five years Innovative Industrial should receive a total payback on their nearly $235 million in investments.

A steady flow of new customers has allowed the REIT’s property portfolio to expand along with a dividend that offers a mere 1.9% yield at recent prices, even though the payout has been growing like wildfire. During this past year, IIP’s increased its payout by 140%. Currently, IIPR is the only cannabis stock paying dividends.

Innovative Industrial Properties also manages a fast growing portfolio of properties that are 100% occupied by tenants that have signed long-term leases with annual rent escalators that should deliver a 15% return on capital investment.

The potential downside is that if a few of these tenants can’t pay their rent throughout the course of their typically 15-year leases, it could become harder for IIPR to stay profitable.

It also makes sense to consider the recent revisions to analyst estimates for IIPR. These recent changes tend to mirror the evolving nature of short-term business trends. Consequently, we can interpret these positive estimate revisions as a good indicator for the company’s business outlook.

It seems that these estimate changes are directly correlated with near-term stock prices.

Valuation is also important, so it’s important to note that IIPR currently has a Forward P/E ratio of 48.26. This is a premium next to the industry average Forward P/E of 15.52.

IIPR will be looking to exhibit strength as their earnings release nears closer.

About the Author 

Eric Bowler is an accomplished journalist providing in-depth insights for more than two decades. Over the past several years his focus has been on the marijuana industry, with a special interest in cannabis growth stocks. His daily coverage of the industry keeps him on top of the key trends with the goal of helping investors make well-informed decisions.

IIPR shares were trading at $125.87 per share on Thursday morning, up $0.19 (+0.15%). Year-to-date, IIPR has gained 180.09%, versus a 20.31% rise in the benchmark S&P 500 index during the same period.

This article is brought to you courtesy of StockNews.

About the Author: Eric Bowler

Eric is an accomplished journalist providing in-depth insights for more than two decades, with a special focus on the cannabis industry. Learn more about Eric’s background, along with links to his most recent articles. More...

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